Snap Is Going Public—Offering Ideas, Not Profits

Snap, the parent company of the social messaging company Snapchat, has filed the paperwork required for its initial public offering.

The company, cofounded by Evan Spiegel, who was one of our 35 Innovators Under 35 last year, is thought to be seeking to raise $3 billion on a valuation of up to $25 billion. It’s expected to go public in March. If all goes to plan, it will be the largest tech IPO since Alibaba in September 2014.

The company’s flagship product, Snapchat, is based firmly around the now: capture a moment, share it, and watch it disappear. It was originally designed as a one-to-one communication tool to send photos and later added video. Then the app allowed people to share stories with larger groups, and also enabled brands to post disappearing articles for people to see. Much of this content can be bedecked with what Snap calls lenses—photo and video filters, most of which are saccharine or silly.

So far, the playful, ephemeral approach has worked: the app has over 158 million active users.

But Snap’s IPO paperwork reveals that, despite generating $404.5 million in revenue in 2016, in total it made a loss of $514.6 million. While it has started generating income via placing ads in stories and asking brands to sponsors lenses, it’s also been spending heavily. Perhaps most notable is the fact that it doesn’t run its own farm of servers, instead running its operations on Google’s Cloud Platform service. And a deal inked last month commits it to spending $400 million per year for the privilege over the next five years.

Immediate profit, then, doesn’t appear to be what Snap is offering to investors. Instead it’s proposing a slice of something much less tangible: vision. Snap doesn’t see itself as a social media company or a messaging service. It would rather you think of it as a camera company with the overarching goal of, as it says, “reinventing the camera” to help people “express themselves, live in the moment, learn about the world, and have fun together.”

But it’s also pushing new technologies and ideas hard. While disappearing messages are its bread and butter, it’s dreaming up new ways to acquire and deliver its evanescent content. So it’s selling its own smart glasses to capture first-person video, building augmented reality into its app, and developing weird and wonderful new ways to make its experience sticky (read: sell more ads).

Snap is clearly brimming with ideas, then, if not profits. The only question is: are people in the market for vision, or are they worried that the successes it breeds might be just as transient as the content they’re centered around? It looks like we'll find out later this year.